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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Exists if a producer can produce a good at lower opportunity cost than all other producers






2. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






3. A firm that has market power in the factor market (a wage-setter)






4. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






5. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






6. Ed = 8 - infinite change in demand to price change






7. The sum of consumer surplus and producer surplus






8. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






9. The ability to set the price above the perfectly competitive level






10. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






11. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






12. Costs that change with the level of output. If output is zero - so are TVCs.






13. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






14. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






15. A good for which higher income increases demand






16. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






17. ATC = TC/Q = AFC + AVC






18. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






19. Two goods are consumer substitutes if they provide essentially the same utility to consumers






20. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






21. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






22. The marginal utility from consumption of more and more of that item falls over time






23. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






24. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






25. Occurs when LRAC is constant over a variety of plant sizes






26. Ed = 0 - no response to price change






27. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






28. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






29. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






30. Entry of new firms shifts the cost curves for all firms downward






31. All firms maximize profit by producing where MR = MC






32. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






33. AFC = TFC/Q






34. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






35. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






36. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






37. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






38. When firms focus their resources on production of goods for which they have comparative advantage






39. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






40. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






41. Models where firms agree to mutually improve their situation






42. Demand for a resource like labor is derived from the demand for the goods produced by the resource






43. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






44. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






45. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






46. Ed = (%dQd)/(%dP). Ignore negative sign






47. The total quantity - or total output of a good produced at each quantity of labor employed






48. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






49. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






50. The output where ATC is minimized and economic profit is zero